Gibeault Automobiles (1983) Ltée v. Minister of National Revenue, [1990] 2 CTC 2152

Tremblay, T.C.J. [Translation]:—This appeal was heard on April 19, 1988 and on August 30 and 31 and September 2, 1988 in the city of Montreal, Quebec.

1. The Point at Issue

The point at issue is whether the appellant company is correct in considering the sums of $155,000 for a lot and $475,346 for a building as the cost of acquisition on December 31, 1982.

The respondent argues that on December 31, 1982 the fair market value of the lot was $311,800 and of the building was $146,200. This difference in the value of the building affected the capital cost allowance taken by the appellant in 1983 and 1984.

2. The Burden of Proof

2.01 The burden of proof is on the appellant to show that the respondent's assessments are incorrect. This burden of proof results from several judicial decisions, including the judgment by the Supreme Court of Canada in Johnston v. M.N.R., [1948] S.C.R. 486; [1948] C.T.C. 195; 3 D.T.C. 1182.

2.02 In that judgment, the Court decided that the facts assumed by the respondent on which the assessments or reassessments were based are also presumed to be true until otherwise proved. In this case, the facts assumed by the respondent are described at subparagraphs (a) and (f) of paragraph 9 of the respondent's reply to the appellant's notice of appeal. This paragraph reads as follows:

[Translation]

9. In assessing the respondent for the 1983 and 1984 taxation years, the Minister of National Revenue assumed the following facts, inter alia:

(a) On December 31, 1982, Gibeault Automobiles Ltée sold to the appellant a property comprised of a lot and building situated at 150 Taschereau Blvd., LaPrairie, Quebec;

(b) In its financial statements for the 1983 and 1984 taxation years, the appellant stated that the cost of acquisition was $155,000 for the lot and $475,346 for the building comprising the property situated at 150 Taschereau Blvd. in LaPrairie;

(c) At the time of the sale of this property, on December 31, 1982, Gibeault Automobiles Ltée and the appellant were related to each other as defined in section 251 of the Income Tax Act;

(d) On December 31, 1982, the fair market value of the property situated at 150 Taschereau Blvd. in LaPrairie was $458,000, as follows:

Lot:	$311,800
Building:	$146.200
	$458,000

(e) The appellant is deemed to have purchased the property situated at 150 Taschereau Blvd. for the price of $458,000, comprised of $311,800 for the lot and $146,200 for the building;

(f) This adjustment to the cost base of the building results in a decrease in the capital cost allowance for the building, in the amount of $8,229 for the 1983 taxation year and $16,022 for the 1984 taxation year.

3. The Facts

3.01 Roger Wilson, the appellant's first witness, is a shareholder in a company which is a 50 per cent owner of the appellant. In July 1982, the witness and Jean-Louis Brunet became the directors of Gibeault Automobiles Ltée (hereinafter referred to as Gibeault) for the purpose of determining whether they should purchase the assets of that company. The principal shareholder, Mr. Gibeault, had died ten months before.

On December 31, 1982, Gibeault sold its assets to the appellant, including the lot and building.

3.02 The witness Mr. Wilson produced a number of documents relating to the appellant's lot and building and to the appraisal of their value.

3.02.1 Exhibit A-1 is the municipal assessment role for the city of LaPrairie dated January 1, 1982, relating to the building in question:

The lot has an area of 96,000 square feet. No improvements were done to the building during the 1982 calendar year.

This lot is comprised of two parcels. There are two buildings on the first parcel, at the level of Taschereau Blvd., one of which is used by the sales and accounting division on the second floor, and the mechanical division on the first floor. The other building houses the used car sales division.

A third building, situated on the lower parcel, houses the painting and bodywork shop. This building was constructed in 1975 and was stated to have cost $150,000. No document was produced on this point.

3.02.2 Exhibit A-2: In September 1981, Gibeault purchased a lot about 21 feet wide, this being the frontage on Taschereau Blvd., by 128 feet deep for $2,000.

3.02.3 Exhibit A-3: The appellant's financial statements, prepared by General Motors, covering the period from January to July 1983.

The statement of profits and losses indicates a profit of $111,179. The new car sales division alone showed a net profit of $98,000, while the profit of the used car division was $12,300.

The divisions showed the following profit (loss):

3.02.4 Exhibit A-4: Gibeault’s financial statements for January 1 to June 30, 1982.

The statement of profits and losses indicates a loss of $63,093. The new car sales division showed a loss of $5,469, and the used car sales division a profit of $14,008.

It also shows:

3.02.5 Exhibit 1-1: On cross-examination, the respondent produced projected financial statements for sales and profits prepared by General Motors. The forecast period was 12 months. These financial statements are dated September 27, 1982.

Mr. Wilson stated that this forecast document is a working tool. The document projected total sales of $11,329,200 and a gross profit of $1,221,640. Rent of $84,000 was also projected.

3.02.6 Exhibit 1-2: Unnotarized agreement dated December 30, 1982 between Gibeault and 120213 Canada Limitée (hereinafter referred to as the numbered company) pursuant to which Gibeault sold to the numbered company its retail sales business, including building, rolling stock, parts and accessories, garage equipment, office furniture and fixtures, for a total of $424,202.

Both parties were represented by the same people: Roger Wilson and Jean- Louis Brunet.

3.02.7 Exhibit 1-3: Notarized agreement dated May 26, 1983 pursuant to which Gibeault sold the properties (lot and buildings described above) to the appellant for the price of $620,000. Mr. Wilson and Mr. Brunet again represented both parties.

3.02.8 Exhibit 1-4: Appellant's income tax returns for 1983 and 1984. The balance sheet shows the net value of real property as $752,022 in 1983 and $731,099 in 1984. Note 5 indicates that the cost of the lot was $155,000 and the cost of the building was $476,301.

The witness explained that the reason that Gibeault sold was that following the death of Mr. Gibeault in October 1981, and as a result of the lack of proper management during the period following his death and of the difficult economic situation in Quebec, Canada and the world, Gibeault did not have a good image. The whole thing had to be transferred to a new company which could continue it under new management.

3.02.9 Exhibit A-5: On redirect examination, Mr. Wilson produced a certificate of survey for the subject lot. The official area is 96,427 square feet.

3.03 The appellant's second witness was Emile Ghattas, chartered accountant.

3.03.1 Mr. Ghattas testified that after the death of Mr. Gibeault and as a result of financial difficulties the Bank Canadian National demanded a guarantee of $250,000 from Mrs. Gibeault. After Mr. Wilson and Mr. Brunet came on the scene as directors of Gibeault, the witness was given the task of preparing a reorganization, set out in Exhibit A-6, which reads as follows:

[Translation]

Reorganization - Gibeault Automobiles Ltée

A. Transfer of all shares in Gibeault Automobiles Ltée currently held by the Gibeault estate and any other person to Gestion Jean-Louis Brunet Inc. and Gestion Roger G. Wilson Inc. on a 50 per cent basis on December 30, 1982.

B. Formation of the company Gibeault Automobiles (1983) Ltée, the shareholders of which would be the management companies.

C. Signature of a management contract between Gibeault Automobiles Ltée and Brunet Wilson Pontiac Buick Inc. for the period from August 1, 1982 to December 30, 1982 for the sum of $165,000 + 14,400 = $179,400.

D. Sale of the assets of Gibeault Automobiles Ltée to Gibeault Automobiles (1983) Ltée on December 30, 1982 in the following manner, electing as provided in section 85.

Assets Acquired			Debts Assumed
Debtors	$	93,436	Bank overdraft	$ 60,678
Stock — new cars		298,540	Creditors & expenses	128,014
Stock — used cars		29,968	Owing on cars	313,983
Parts and accessories		128,414	Financing reserve	36,876
Prepaid expenses		3,055
Trade-in fund		36,876
Investment		90,000	Owed to
			Brunet Wilson PB	165,000
Land and building		620,000
Garage equipment		65,000	Mortgage debt	266,336
Furniture and fixtures		30,000
	1,395,289			$970,887
Purchase Payment
Assets purchased		$1,395,289
Liabilities assumed		970,887
		$424,402

E. Arrangement of a second mortgage of $100,000 by Gibeault Automobiles (1983) Ltée to the Continental Bank.

F. Declaration of a dividend of $414,402 by Gibeault Automobiles Ltée to Gestion Jean-Louis Brunet Inc. and Gestion Roger G. Wilson Inc., and redemption of common shares of Gibeault Automobiles Ltée and abandonment of the charter (possible total taxable capital gain of $10,000 in the hands of the two management companies, or $1,250 each).

G. Issuance of $601,000 in class "A" shares of Gibeault Automobiles (1983) Ltée - 50 per cent held by each of the management companies.

H. Liquidation of Brunet Wilson Pontiack [sic] Buick Inc. under 88(2) into the management companies (Brunet Wilson) possibly in 1983.

H1. Dividends

H2. Redemption of capital

3.03.02 The witness explained that the $424,402, which is the cost of the transaction in I-2 dated December 30, 1982 (para. 3.02.6), is simply the differ- ence between the "assets acquired” of $1,395,289 and the “liabilities assumed" of $970,887 in Exhibit A-6.

Mr. Ghattas explained that when the lot was sold on May 26, 1983, he fixed the price of the property at $620,000, based on the municipal assessment of $668,480 and taking into consideration the problem of car dealerships during those years.

The reorganization of Gibeault was a result of the increasingly difficult financial situation since the death of Mr. Gibeault. The heirs were not in a position to continue to manage it and to provide the necessary credit.

The financial statements for January to December 1982 prepared by General Motors (Exhibit A-7) show that from August to December, that is, after Mr. Wilson and Mr. Brunet came on the scene as directors, there were profits. During the first seven months of the year, a deficit of over $82,500 had been incurred. The last five months ended with a profit of over $58,000.

3.03.3 One of the General Motors company's conditions sine qua non for permitting the transfer of the GM franchise was that it approve the choice of the new shareholders.

This approval was received in February 1983, thereby confirming the contract filed as 1-5, by which the heirs of the Gibeault estate transferred the 999 Gibeault shares on December 31, 1982 for the price of $1 each to the Roger G. Wilson and Jean-Louis Brunet Inc. management companies.

3.03.4 Mr. Ghattas stated that the whole reorganization and the transfers involved in Exhibit A-6 were designed to protect the new investors. The situation had to be clear.

3.04 Rosaire Bouchard, a certified appraiser, was the appellant's third witness, and his qualifications as an expert were not disputed.

3.04.1 Mr. Bouchard's appraisal report was filed as Exhibit A-9.

Appraisal of the Buildings

He appraised the three buildings first using the replacement cost approach, and then applying the observed accumulated depreciation. In his opinion the buildings were in excellent condition and maintenance had been above average.

Building #1: 2 stories: garage, showroom, administration; measuring 161’ x 82’ and a ground area of 13,132 square feet.

Building #2: Painting and bodywork shop; measuring 60’ X 81’, and a ground area of 4,860 square feet.

Building #3: Sales office; measuring 12’ x 32.5', and a ground area of 390 square feet.

New Replacement Value of Building:

Building #1	15,661 @ $27.48	430,425
#2	4,860 @ $19.46	94,584
#3	390 @$28.26	11,021
Site improvements		18,080
Miscellaneous		12,940
Miscellaneous	=	6,260 $573,310,00
Application of Cost Technique:

#1: 35 per cent $150,648

Total depreciation ( ): #2: 6 per cent $ 5,675

#3: 39 per cent $ 4,297

($160,620)

($412,690)

3.04.2 Appraisal of Lot

Relying on a study of seven “comparables” for which the unit price per square foot varied from $0.83 to $3.90, Mr. Bouchard established the value of the level lot at $2.40 per square foot and value of the sloping lot (20 per cent of the total area) at $1 per square foot used for access to the rear lot.

3.04.3 The total value of the lot ($204,400) and the value of the buildings by the replacement cost approach ($412,690) therefore amount to $617,090.

3.04.4 Mr. Bouchard also used the income approach to find the market value of the whole property by capitalizing the standardized annual net income of a property at a rate derived from the market.

Briefly, this is the price that an investor would pay, based on net income and the rate of return that he or she would anticipate receiving from the capital invested.

Potential Rent

The appraiser first calculated a potential gross annual income of $168,250 and then an actual gross income of $159,838. The details of this calculation are as follows:

Office on Second Floor:

42 x 42.5		1,911
17 x 25.0		425
17 x17.0		193
		2,529	@	$ 6.50	$ 16,438
Garage Ground Floor:
161 x 82.0		13,202
Less	70 sq. ft.	(70)
		13,132	@	$ 9.51	$124,885
				Total	$141,323
Painting and Bodywork:
81 x 60.0		4,860	@	$ 4.67	$ 22,696
Sales Office (Worn):
12 x 32.5		390 @		$10.85 $ 4,231
Potential Gross Annual Income:					$168,250
Less
Vacancies and bad debts 5 per cent					$ 8,412
Actual Gross Rent:					$159,838

This expert arrived at a total income after operating expenses of $90,472, as follows:

Finally, the relationship between net income and the rate of capitalization leads to the following estimate of economic value:

The rate of capitalization used, 15.25 per cent, was explained as follows:

Choice of the Capitalization Approach

The mortgage/investment capitalization approach will be used as a tool for transforming net income into a statement of value. This approach involves the determination of a combined rate of capitalization.

This rate reflects the anticipated demands of prudent investors in respect of return on investment as well as the effect of the mortgage market as a factor influencing return.

The combined rate of the mortgage/investment approach is determined as follows:

(EXY)	+	(M x y)
(per cent if rate of return			(per cent of mortgage
X		+	X
investment sought)			financing constant)
(25 per cent x .14)		+	(75 per cent x .13)
(.035)		+	(.0975)
Actual Rate of Interest:		.1325
Amortization (50 years):		.02
		.1525

3.04.5 In order to determinate the fair market value of the subject lot, Mr. Bouchard selected comparables in the vicinity of the subject lot. These were vacant lots.

3.04.6 In appraising the buildings Mr. Bouchard did not use the direct comparison technique, since there was no comparable in the LaPrairie region. He stated that selecting comparables outside the region involved making too many adjustments which would clearly obviate the function of the comparable.

3.05 Roger Lussier, the respondent's appraiser, produced his report as Exhibit I-7.

3.05.1 Appraisal of the Lot

This appraisal was conducted using the direct comparison technique, which is based on sales of similar properties.

After studying nine comparables, Mr. Lussier relied on sale number 8 of a lot with an area of 41,716 square feet. This lot is similar to the subject lot: traffic is heavy and is on one side only. The sale took place in November 1983 for $180,000, or $4.31 per square foot. He therefore appraised the frontage at $4.31 and the rear at $2 (sale number 1), as follows:

During his testimony, Mr. Lussier also acknowledged that he had incorrectly included in the area of the lot 2,730 square feet which do not belong to the appellant.

3.05.2 Appraisal of the Buildings

In order to appraise the buildings, Mr. Lussier used the sale prices of garages over the period from 1980 to 1987.

These sales took place in metropolitan Montreal, from Verdun to Varennes, including Chateauguay, Laval, St-Jean, St-Constant and Mercier.

From these sales, the respondent's appraiser took data to be used in applying the direct comparison and income approaches. He then did what is called a correlation study.

3:05.3 Direct Comparison Approach

At page 29 of Mr. Lussier's appraisal report, this approach is described as follows:

[Translation]

We took from the sales indicators of value such as square foot price for buildings with and without the lot. We also used an income multiplier as indicated according to the rates and connected sales.

We used an average of all these ratios.

Market value including lot:

17,950 sq ft at $23.52	= $422,185
Market value of buildings without lot:
17,950 sq ft at $10.63	= $190,809
+ market value of lot (PV)	311,700
Total:	$502,509
Value rounded off at:	$502,500
Market value using multiplier:
Market rent:	$ 60,133
	7.62
Value of:	$458,454
Rounded off at:	$458,450

Using the three indexes available in the direct comparison approach, we establish the market value at $458,450.

3.05.4 Income Approach

This approach is described at page 30 of Mr. Lussier's appraisal report as follows:

[Translation]

The income approach consists in capitalizing the discounted income from a property, at a rate derived from the market, to arrive at the market value.

In fact, relying on the principle of anticipated return, the appraiser is seeking the price that an investor would pay, based on the net income and the rate of return demanded which he or she anticipates will be received from the capital invested.

Rental Value

We have taken several rates from the market and the reader will find a list of these rates at pages 25 and 26. The rates are identified by the following numbers:

Sale		Area	Date	Unit Price
1. (Verdun)		25,446 sq ft	1978 to 1982	3.34 to 3.75
4. (Mercier)		20,620 sq ft	1982 to 1987	2.33
5. (Chateauguay)		9,197 sq ft	1984 to 1989	2.94 to 3.91
6. (St-Jean)		16,730 sq ft	1983 to 1988	3.23 to 3.59
9. (Montreal)		41,682 sq ft	1980 to 1983	1.62
Estimated market value.
Subject:
Garage	13,090 sq ft at 3.35		$43,852
Addition	4,860 sq ft at 3.35		$16,281
			$60,133

Applying a rate of capitalization of 13 per cent to the $60,133 rent, he arrived at a market value for the subject property using the income approach of $462,575.

3.05.5 Correlation

The correlation study is found at page 44 of Mr. Lussier's appraisal report and reads as follows:

[Translation]

Correlation consists in analyzing the reciprocal relationship among the facts relating to the property to be appraised and also in comparing the values indicated by each of the approaches used.

Cost approach NIL

Direct comparison approach $458,450

Income approach $462,575

Cost approach: This approach was not used because physical and functional depreciation are very difficult to estimate.

Income approach: The information provided by this approach is very valid and should be used in establishing the market value of the subject property.

Direct comparison approach: The results derived using this method support the market value.

Conclusion: The market value of 150 Taschereau Blvd. varies between $458,450 and $462,575. Considering the economic situation of car dealerships at the date of the appraisal, we estimate the fair market value at $462,575.

3.05.6 It goes without saying that this $462,575 includes the value of the lot, which was established separately above as $311,800.

3.06 In his cross-examination, Mr. Lussier acknowledged that he had visited the two buildings that he appraised for a period totalling 25 minutes. He did not take the third building into account.

He acknowledged that a replacement cost analysis for these buildings would have required a thorough examination that could take at least a day, since they comprise 18,382 square feet altogether, without including the roof.

3.06.1 With respect to the comparable sales used to arrive at the value of the lot, Mr. Lussier acknowledged on cross-examination that all the comparables included buildings at the time of sale. The price of these buildings was not subtracted from the total sale price in calculating the price of the lot. Moreover, the evidence with respect to two comparables (numbers 1 and 8) used by Mr.Lussier indicated that the new purchasers continued to use the buildings for some time after the sales.

The photograph in Exhibit A-15 (sale #8) shows a building at 559 chemin St- Jean, LaPrairie, which had a municipal assessment of $81,570, while the land was assessed at $42,290 (Exhibit A-14), for a total of $123,860.

The price for sale number 3 which occurred in 1976 was $50,000 for the lot and buildings. The area of the lot was 3,970 square feet and the unit price was $12.60. However, the purchaser continued to use the buildings until 1981.

3.07 With respect to sale number 1, the unit cost of which at $2 per square feet was used in appraising the rear of the lot, Mr. Bouchard's uncontradicted testimony indicates that this lot of 31,084 square feet was purchased on January 26, 1984 by the same purchaser as for comparable number 8 on November 2, 1983. The purchaser of number 8 is the numbered company 2154-7328 Quebec Inc., incorporated by Daniel Tardif and family, which was also the purchaser of lot number 1. The two lots are situated side by side. With the purchase of lot number 1, this was a land assembly. By purchasing lot number 8 from Marché St-Hilaire, the Tardif family had purchased their biggest competitor.

The buildings on the lots were demolished in 1984 in order to construct new ones for over a million and a half dollars (Exhibit 1-7, photograph in schedule, page 14).

Mr. Lussier's report (Exhibit i-7, schedule, page 12) showing the principal information concerning the sale of the Marche St-Hilaire to 2154-7328 Québec Inc. on November 2, 1983, sale number 8 referred to above, contains the following comment: [Translation] "sale with building, vender undertakes to clear the lot . . .”.

Thus a careful reading of the sale contract (Exhibit A-13) in no way supports the conclusion that Mr. Lussier’s report implies, that the buildings were to be demolished. Finally, there was uncontradicted evidence that sales number 2, 3 and 4 were also land assembly sales.

4. Analysis

4.01 At the outset the Court rejected the figure shown in Exhibit 1-2, $424,402 (para. 3.02.6) as not being the total value of the transaction. This figure was explained by Emile Ghattas whose testimony was assisted by Exhibit A-6 (para. 3.03.1). It is simply the difference between the assets acquired and the liabilities assumed in Exhibit A-6 and was not representative of the value of the property (para. 3.02.2).

We still have the whole problem of finding the fair market value of each of the assets, the lot and the buildings.

4.02 Value of the Lot

4.02.1 The value of $311,800, determined by the respondent, is assumed to be correct unless the appellant reverses the burden of proof, which rests on him, by a preponderance of evidence.

The appraisal performed by the respondent's appraiser was strongly criticized by the appellant, and not without cause. All the comparables used in fact also included buildings, and the price of the buildings was not deducted from the total sale price.

In Principes et concepts generaux en evaluation foncière, which was prepared by a committee set up by the Ministère des Affaires municipales, paragraph 9.1 deals with the direct comparison approach as follows:

[Translation]

The direct comparison approach is based fundamentally on the principle of substitution, which provides that an informed purchaser will not pay more for a property than he or she would pay for another property with the same characteristics. Thus properties that are used for direct comparison must be similar in their essential points to the property to be appraised. They must comprise similar economic units. The appraiser must note not only similarities but also dissimilarities, and thus put himself in the position of a typical purchaser or vendor examining the market in search of relevant information in order to obtain the best price. When there is sufficient comparable data (direct evidence), the direct comparison approach is the highest form of evidence of the market value, because in appraisals there is nothing more important than studying property transactions taking place on the market. The main difficulty that may be encountered in using this approach is that there may be few, if any, transactions involving properties that may be directly compared with the property to be appraised. Even where sales could normally be used as comparables the appraiser will not always be able to determine the motivations and circumstances surrounding the transaction. We must also add that all information from the market relates to transactions that have already taken place; market trends must then be predicted using this information.

Paragraph 9.2 relates to the collection of data, and reads as follows:

The data needed for the direct comparison approach varies with the type of property being appraised. However, there are four basic categories of information which must absolutely be taken into account regardless of the type of property being appraised:

— sale prices or offers on comparable properties;

— the conditions surrounding each sale;

— the “comparability” of the neighbouring area and the environment;

— the description of the properties, that is, the lots, buildings and improvements.

It seems to me that in order to find the fair market value of the lot "in the conditions surrounding each sale” we must first select lots without buildings.

If we include in comparable 8 the total sale price, $180,000, and apply that to the lot alone, it seems obvious to me that the lot is overvalued, particularly when we know that the vendor was the purchaser's principal competitor.

I am inclined to think that the price of the business, which was high, is being applied to the lot alone. This evidence indicates that the frontage of the subject lot is overvalued since the frontage was appraised on the basis of the single comparable, number 8 (paras. 3.05.1, 3.06.1, 3.07).

The evidence seems to leave some doubt as to the value of comparable 1, which was used as the basis for appraising the rear part of the subject lot. Not only was the value of the buildings not deducted, but it appears that it was the same purchaser as for the property in comparable 8, and that this was what is known as a land assembly sale, these being adjoining lots.

Land assemblies have always been considered to be bad comparables. The price paid may actually be far in excess of the fair market value and can amount to double or even more, depending on the circumstances.

Finally, by the admission of counsel for the respondent himself, the value established for municipal taxation purposes in the year in question is in general considered to be reasonably accurate. He thus confirms the testimony of the appraiser, Mr. Bouchard, who worked for several years in municipal assessment on the south shore in Montreal, where the subject lot is situated. On January 1, 1982, the subject lot was appraised at $231,430 (para. 3.02.1).

In seeking to establish the value of the lot, Mr. Bouchard selected comparables situated in the vicinity of the subject lot, including only vacant lots. He also took into account the slope of the lot (paras. 3.04.2, 3.04.5).

4.02.02 The balance of the evidence with respect to the value of the lot favours the appellant's position. The lot is appraised at $204,400.

4.03 Value of the Building

4.03.1 On this point, the respondent's appraiser rejected the replacement cost approach, because in his opinion [Translation] ”. . . physical and functional depreciation are very difficult to estimate" (para. 3.05.5). He spent only 25 minutes on his visit to the two buildings. A thorough study would have taken him at least a day (3.06). However, the appellant's appraiser did use this method. He presented detailed evidence and concluded that the value was $412,690 (para. 3.04.1).

4.03.2 Moreover, he rejected the direct comparison approach because in his opinion there was no comparable in the LaPrairie region where the subject lot is situate. To select comparables in other regions involved too many adjustments for the comparable to be valid (para. 3.04.6). On the other hand, the respondent's appraiser used this method, and went looking for comparables throughout metropolitan Montreal (para. 3.05.2). He concluded that the value, rounded off, was $458,450 (para. 3.05.3).

4.03.3 In addition to these comparables, the respondent also sought out data to use in the income approach. He arrived at a value of $462,575 (para. 3.05.4).

On the other hand, in his appraisal, Mr. Bouchard arrived at an economic value for the buildings on the subject lot of $415,665 and a total economic value of $630,065, using the income approach (para. 3.04.4).

4.03.4 First, I agree with the opinion of counsel for the appellant that the comparables taken from outside the LaPrairie region cannot be proper comparables. The respondent's appraiser failed on this point in choosing his ten comparables, particularly since of the ten comparables used three took place in 1982 and earlier, and all the others were from after 1982: three in 1983, one in 1984, one in 1985 and two in 1987.

The subject lot was situate in the LaPrairie region and the fair market value was the value on December 31, 1982. The location of the subject lot and the day of the fair market value are two fundamental facts that must be the appraiser's starting point.

The Court must rely on the data in the report by the appellant’s appraiser. Moreover, as in the case of the lot, the municipal value of the buildings on January 1, 1982, $437,350 (para. 3.02.1), confirms the conclusions in the report by the appellant's appraiser.

The preponderance of the evidence therefore favours the appellant's position. The value of the buildings is $415,665.

5. Conclusion

The appeal is allowed with costs and the matter is referred back to the respondent for reconsideration and reassessment in accordance with the above reasons.

Appeal allowed.